Network Externalities in
Hawala Exchanges
Anamaria Berea
Department for Computational Social Science
Center for Social Complexity at Krasnow Institute for Advanced Studies
George Mason University
Introduction
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What is hawala? – exchange mechanism
self-enforced by trust and reputation
Similar to Western Union
Mostly associated with certain foreign
remittances
No data - social network analysis
Kuran, 2004: specific informal Islamic
institutions lead to lock-in situations
Other business associated with the money
transfer practice
Hawala Mechanism
Purpose of this research
A methodological proposal on the
empirical observations
 Common-pooling SNA techniques with
nested game theory
 Not-empirically exhaustive, but empirical
dataset mapping
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Method of Analysis
1. Building the datasets by proxies and
informational conjectures:
- proxy: the Pakistani players in major
international business (hawaladars
network; Pakistan vs. Afghanistan)
- proxy: the pool of countries under
scrutiny for remittances by Interpol and
UN frozen assets
- 3 files: personal ties, business ties and
locations (mini-clusters)
Method of Analysis
2. Analyzing the datasets:
- nested game hypothesis (Tsebelis, 1991)
– correlation matrix
- shows the network externalities
Results and Findings
Ego Networks in Terrorism
Betwenness Centrality for Location
The associated businesses network
Terrorism Periphery and Lock-in
Hypothesis
MDS with geodesic distances
Degree centrality in the correlation
matrix
Discussion
Network externalities: drugs, gold, Dubai
and Mumbai
 Lock-in emergence: terrorism in NWFP
 High Centrality Measures for ObL,
Dawood Ibrahim and TTP
 This method of analysis by proxies and
game theory validates conceptual and
theoretical publications
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Thank you!
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Questions?
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Network Externalities in Hawala Exchanges